Is It "The End Of Life In Washington As We Know It"? - Strategies For Complying With The Honest Leadership And Open Government Act Of 2007

Tuesday, January 1, 2008 - 00:00

On September 14, 2007, President Bush signed the Honest Leadership and Open Government Act of 2007 ("HLOGA") into law. Together, HLOGA and the House of Representatives' January 2007 internal rules amendments work sweeping changes in congressional gift and travel rules and requirements for disclosure of lobbying and related activities under the Lobbying Disclosure Act. HLOGA also expressly provides for enhanced civil, and even criminal, penalties for non-compliance. The General Accounting Office will now have authority to conduct random "compliance" audits of these filings and request (but not subpoena) back-up corporate documents and information.

Much has since been written about the resulting "end of life in Washington as we know it," with claims that the new obligations are insuperable, unclear, and even unconstitutional. With that said, HLOGA is on the books, and it is important for corporate counsel to think about how to comply with these new rules. Various state regimes already impose similar, if not more stringent, requirements, further counseling for an integrated compliance program.

HLOGA's deadline is now - the gift and travel rules are in effect, and the new lobbying disclosure provisions commence January 1. A workable set of compliance measures, tailored to an individual entity's culture and operations, is both the best solution for compliance and an objective defense in case of error.This article will not examine each new HLOGA requirement in detail; instead, it will help promote consideration of a practical game plan.

First some background: Dramatically simplified, congressional rules now forbid a lobbyist or entity employing or retaining a lobbyist from providing a gift (including travel) to a Member of Congress or congressional personnel. The new rules do, however, retain nearly two dozen exceptions. They also significantly scale back such lobbying entities' ability to sponsor congressional fact-finding and other trips. In addition, the new law would impose criminal liability for "knowingly and corruptly fail[ing] to comply with any " HLOGA provision.

HLOGA also requires the reporting of more information regarding lobbying (and lobbyists), more often. Semiannual federal "LD-2" lobbying reports must now be filed quarterly, within 20 days (rather than 45) of reporting period close. HLOGA also created a major new semiannual reporting and certification regime for lobbying entities.

More specifically, lobbying entities and their registered lobbyists must start reporting much of their political giving. Reportable activity includes not only federally regulated political and campaign contributions, but also donations to events or entities named for or related to a public official. The new semi-annual reports will also require periodic certification, a l Sarbanes-Oxley, that the lobbying entity and its registered lobbyists have not provided a gift, including travel, to a congressional member, staff, or officer "with knowledge" its receipt would violate House or Senate rules. The certification requirement is significant, bringing potential criminal liability for "knowingly and willfully" making a false statement in a document the law requires be submitted to Congress.

The new criminal provisions and certification requirements are certainly a wake-up call. But it is unlikely there will be tumbrils full of lobbyists being carted from K Street to Allenwood.HLOGA's criminal provisions' requirement for "corrupt" intent will likely be read to require conscious wrong-doing. Much more concerning, however, the "knowing and willful" federal false statements criminal liability standard regarding the certifications is significantly more malleable and subject to prosecutorial mores of the moment.

Experience since enactment of the Bipartisan Campaign Reform Act of 2002 ("BCRA") may shed some light on future HLOGA criminal enforcement. In BCRA, Congress imposed felony "knowing and willful" criminal liability for federal campaign finance law violations. To the extent they reveal any trend, DOJ Public Integrity Section enforcement statistics reveal increased campaign finance-related prosecutorial activity, but not a wholesale shift in enforcement away from civil Federal Election Commission processes. One must distinguish the type of conduct involving Jack Abramoff and Reps. Bob Ney (R-OH) and Randy "Duke" Cunningham (R-CA); the acts to which they pleaded guilty needed no legal reforms to criminalize.

No matter how HLOGA is enforced, a premium should be placed on developing a reasonable, good-faith compliance system. Having a system in place provides an argument against prosecution if an employee makes an inadvertent mistake or has a principled, but differing, view of a gift rule exception's scope. (The same might not be said for wholesale, repeated, notorious, questionable invocations of that exception, however.)Such a system also represents a mitigating factor under the sentencing guidelines, if the worst happens.

Any such compliance program should provide corporate personnel with a set of clear, objective guidelines for conduct and reporting they can and must meet. The compliance system must, however, mesh with existing corporate processes and culture (assuming they do not represent willful blindness or evasions). Imposing overambitious, unachievable requirements that end up being honored in the breach are ultimately worse than no system at all if a break-down occurs and an investigation ensues.

So, what do you need to do? First, HLOGA imposes differing burdens depending on the lobbying entity. Regarding disclosure, for a lobbying firm with a range of existing and incoming clients, the task is keeping up with ensuring that "LD-1" registrations are timely made and that "LD-2" periodic disclosures are kept current from one reporting period to the next. Questions to be asked include what clients are active or can be terminated, the issues the firm is handling for the clients, whom the firm has contacted in the period, and who in the firm is working on the matters. By contrast, because most lobbying firms generally maintain updated client accounts payable records, information about lobbying receipts should be readily and timely available.

The situation is probably reversed for a corporation or trade association. These latter entities may only have one "LD-2" periodic disclosure form to file, and the lobbying activities on which corporate or association staff worked may be able to be readily identified. The more complicated step, though, is for the corporation or association to capture its internal reportable expenses for "lobbying activities" efficiently. More specifically, personnel must understand what activities are includable as lobbying activities, as lobbying activities represent a broader universe than "lobbying contacts." For instance, the former category can involve preparation of materials for lobbying efforts. Particularly if the question of registration is presented, personnel must then determine how much time, and sometimes what percentage of their time was devoted to lobbying activities in the reporting period, and translate that information into a lobbying expense calculation. Given HLOGA's impending 20-day reporting deadline, these calculations must be made quickly.

Corporate counsel may face other HLOGA considerations. First, is the question who in the entity is a "lobbyist." Before, an entity may have registered anyone doing any lobbying in an abundance of caution, rather than seeking to determine if the individual met the thresholds for lobbying ( i.e. , twenty percent of his or her time devoted to "lobbying activities" in a reporting period and more than one "lobbying contact"). Now, however, such a registration entails burdens. A registered lobbyist cannot do much to help plan corporate-sponsored congressional trips. A registered lobbyist must disclose political contribution and donation activity and may even have individually to certify compliance with congressional gift and travel rules. Second, HLOGA left the scope of the disclosure obligations quite vague relating to ad hoc coalitions that engage in lobbying (but not necessarily grassroots) activities. Third, each registered lobbyist must disclose his or her covered government employment back twenty years from initiating lobbying activity for a client.

Tracking and training for gifts and travel may present the most formidable HLOGA compliance challenge for an entity with a significant Washington presence. As explained above, HLOGA requires institutional and likely individual lobbyist compliance certifications. On-going, mandatory training is equally essential - HLOGA requires periodic institutional and lobbyist certification of knowledge of gift and travel rules. Such training ought not be limited to registered lobbyists to the extent applicable gifts by non-lobbyist personnel may be attributed to the certifying organization under congressional rule guidance.

Tracking to ensure informed certification is multi-faceted. At a minimum, an informed certification should involve closer institutional monitoring and/or even pre-approval of business expenses involving congressional activity and contacts (beyond simply lobbying). Better record-keeping generally attends better monitoring.Participation in events involving congressional personnel, as well as corresponding charitable events, must be monitored, especially if the certifying entity is a host. And, if not, a charitable or "widely attended" event invitation must come from the event sponsor. An institutional decision may be required regarding whether to sponsor congressional travel outside a Member's home district or state, where more forgiving local travel rules can apply.

Further, individual activities should be addressed. Political fundraising activities are covered under the gift rules. Use of the "personal friendship" exception to the congressional gift rule by corporate or association personnel may need to be factored in. At a minimum, personal friendship gifts should never be reimbursed as a business expense. Even relatively commonplace personal activities can warrant forethought. For instance, a consistent pattern of providing a staff member a ride home might present an issue; a gift is defined as any "item having monetary value." A corporate or association policy regarding such gift-giving may be considered, albeit in light of the practical reality that personal relationships in Washington can span decades.

Finally, each state has its own lobbying laws and gift rules, and cities may, as well. The scope of the lobby registration and reporting rules vary by state, and may have undergone recent amendment. Significantly, moreover, activities covered under state lobbying regimes may include not only legislative lobbying, but executive branch lobbying, procurement activity, and "grassroots" activities. Certain states also impose additional campaign finance restrictions (colloquially termed "pay-to-play" rules) on prospective and incumbent public contractors, and their principals. Accordingly, a corporation or trade association is well served by developing a compliance approach that not only responds pragmatically and timely to the new HLOGA requirements, but can also be scaled to accommodate many state and even local requirements.

David E. Frulla is a Partner and Robert R. Cohen is Special Counsel in Kelley Drye & Warren's Campaign Finance and Political Law and Public Policy Group Practice. They have had considerable experience advising clients on political law and campaign finance compliance. In 2006 Kelley Drye paired with MultiState Associates Inc. to develop a Lobbying Registration and Reporting Service (LRRS) for federal and state lobbying registration and disclosure.

Please email the authors at or with questions about this article.